In Praise of the Adult Allowance

In the past, many Get Rich Slowly readers have sung the praises of the “adult allowance”. Though I’ve read enthusiastic comments supporting this idea, I’ve never paid it much heed. To be honest, it’s always sounded lame, and I didn’t think it would be useful to me. I was wrong.

Accidental allowanceBefore our short vacation in early October, I pulled $200 out of the ATM. This is unusual for me. I don’t like to carry a lot of cash. I find it easier to track my spending when I use credit or debit cards.

I didn’t spend very much on our trip. I bought a few old books, but mostly we did low- or no-cost sightseeing. When we returned home, I still had about $160 in my wallet.

Normally, I would have put that money back into the bank. I kept it in my wallet instead. For the rest of the month, I used it whenever I bought something that wasn’t a Need. This wasn’t anything I had planned to do, and it wasn’t even conscious at first. It just happened. Eventually I realized that I had been forcing myself to purchase Wants with the leftover cash.

By the end of October, I’d spent nearly all of that $200. I’d only used my plastic for play once or twice. “Interesting,” I thought. “What if I were to do this intentionally? What if I pulled out $200 for the month of November?” So I did.

Cashing it in
At the beginning of November, I withdrew another $200. All month, I used that money whenever I purchased something that wasn’t a Need. The new Popeye book? Paid with cash. Quantum of Solace, popcorn, and red vines? Paid with cash (and without complaint). A trip to my favorite cheap taco place for lunch? Cash again.

As the weeks went by, I began to feel liberated. By allocating this money to use however I pleased, I was freed from feeling guilty about every little thing I bought.

Still, I wasn’t spending the money willy-nilly; in fact, I found myself considering every potential purchase carefully. Because I knew I wanted the $200 to last the entire month, I was careful with it early on. I passed up easy treats. By pinching pennies early, I was able to afford a splurge I had thought to deny myself.

When tickets for The Decemberists sold out, I gave up hope of seeing their post-Thanksgiving show here in Portland. But entering the final week of the month, I still had $100 in my wallet. Because of this, I purchased a $60 ticket off of Craigslist, something I normally wouldn’t have even considered. I was happy to do it.

Now I’m ready to pull out another $200, and I’ve come to a realization: That adult allowance idea I used to think was lame? I actually like it!

Part of a balanced budget
Though the initial $200 withdrawal was arbitrary, it works well for my income and my circumstances. I can afford to give myself $50 a week without compromising my other financial goals. It works well as part of my balanced money formula. I intend to use this number going forward, at least for a couple of months.

Though I’m nearly sold on the adult allowance, I still have a major concern. As you know, I’m a proponent of tracking every penny you spend. This is easy with debit and credit cards, but I’m notoriously poor at accounting for my cash spending. I’m awful at it. I’d love to hear what others have done. If you give yourself a cash allowance — even if you don’t call it that — how do you handle the record-keeping? For now, I’m just logging it in Quicken as $200 in “Misc Expenses” when I make the monthly withdrawal.

I’m also interested to hear other tips and tricks from folks who have a cash budget for fun. How much do you give yourself? What do you spend it on? (Though I’m spending mine on Wants, it doesn’t cover all wants. When Kris and I go out to dinner, I stick to my traditional system.) By using cash for my discretionary spending, I’ve found I’m less likely to make impulse purchases. Have you found that to be true as well?

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This is similar to what I do. Unfortunetely my monthly allowance is around $350 which is probably high but I’m weak when it comes to spending on food. I automatically deduct this amount from my budget each month and the extra cash left over, I tuck away somewhere. When this accumulates, I use it towards bigger “wants” purchases like that laptop I have been craving or a nice tv. It actually works very well because you have given yourself a goal and a boundary inside which you have no guilt spending.

We use and allowance for all discretionary spending. We each get $500 for half the month which covers a discretionary spending which includes groceries, gas, dry cleaning, eating out, entertainment, small Home Depot expenses (we have real estate investments so larger HD expenses are funded by another source), personal care, gifts (except not holiday gifts) and clothes. While many people would object to calling groceries and gas disrectionary we still pay for those expenses out of our allowances.

We use debit cards which helps with the tracking issue you mentioned.

Basically on the first and fifteenth, I pay all the recurring and fixed bills, we put money aside for savings, our 2008 money goals, etc. and then we each get our allowance. So if I want to spend more on clothing in one month I’ll bring my lunch every day instead of eating out. The allowance works for us because we can spend the money however we like on whatever we want, but once its gone we can’t spend more. So if we run out of money we might be eating soup or PBJs for a week. Since we’ve been working this plan for a while we are pretty good about planning our spending so that we don’t run out of money.

We do it but use separate bank accounts with debit cards. One joint account plus a personal account for each of us. Each paycheck a small portion goes into the personal account with everything else into the joint. The personal account money is basically our allowance. It covers cash, dining out, entertainment, etc. You can set up quicken or mint to ignore those accounts or track them.

My wife and I do the same thing. Each get $250 a month as ‘fun money’. We each set up Schwab accounts, which gain a small amount of interest, and have debit cards with those accounts. If interested, this would be a good way for you to track each penny, if you still desire to do so. We started this about four months ago and I have yet to spend a penny of the money, actually gained a bit of interest. I haven’t decided if I want to have a lot of small splurges or save for a bigger one, but I like the option of having this money that allows for this flexibility.

For record-keeping, just keep your receipts! Put them in your pocket, and at the end of each day, you can either put it into your spreadsheet, or put them in a little receipt box and tally it up at the end of the month. Just toss them when you are done. :-)

I think it’s very important that the “allowance money” not need be recorded penny-for-penny. It’s fun money, totally unaccountable (except for the fact that you mark $50 / week as “personal alloance” on your budget). For my wife and I it’s important to have this discressionary money that we don’t have to save receipts, etc.

My husband likes to have a cash allowance. He takes $40 per week to cover whatever small expenses (lunch, books etc). I use to think think this allowance was remedial, but he likes it. It makes cash flow planning easy and sets a good example for the kids.

My husband and I each get a set amount of “blow money” every two weeks on my payday. He gets $40 every two weeks and I get $20. We mostly use it for lunches out at work. His job requires him to eat out more which explains the discrepancy. I log the withdrawal in Quicken and use the categories I created for our blow money. Beyond that, my record keeping doesn’t particularly care where it went.

I also use cash for groceries and almost anything bought at a brick and mortar store with a cash register. :) I log it to the appropriate category when I do the withdrawal and put it a labeled envelope. My record keeping does not care nor does it need to know exactly where I spend the grocery money. The system only works, of course, because I hold myself accountable to only using money out of the appropriate envelope. Seeing that physical cash limit helps control all of my spending. I used to be much more meticulous in my record keeping, but I’ve found this system to be just as good and very liberating. The time I spend on household finance record keeping has plummeted and I’m still confident it is accurate!

I used buxfer.com to track my spending. It is nice for cash spending, because you can send a text from your phone to an email address they provide, and the amount and description will show up in your buxfer transactions.

Great post! I’ve done something similar and have found it very useful and liberating as well.

Currently, I don’t use cash for my “allowance.” I use the envelope method of budgeting and track it virtually (not with cash) using software I wrote (www.neobudget.com). This lets me have the benefit of using my debit card, while still tracking my budget with envelopes.

I have an envelope for my money and my wife’s money. We can each use this money at our discretion without fear of hurting our budget. It’s very liberating, and I second your endorsement.

I try to track every dollar I spend with the exception of what I call blow money. I give myself $300 a month. I only get $100 at a time. I spend this money on fun stuff or whatever I choose to do with it. I dont account for what I spend it on. I have found that I have become somewhat hesitant with this money.This past month I only spent $167. The balance goes into my general savings account at the end of the month which draws 3.75% APR in an online account.

What I did to start tracking cash was to treat it like another account. I added a ‘Cash’ account to my budgeting software and any time I balanced my checking or savings accounts I balanced the cash account as well. Also, whenever I made a withdrawal I would mark it as an account transfer along with an expense for any fees that might be included.

If you’re only using the money for wants and “fun”, JD, then you might want to simply set up an expense account in Quicken titled “Fun Spending” or something along those lines. You expressly state that it is a small amount and you already know what the money is being used for. I really don’t think that you need to drive yourself completely crazy with trying to track where every penny ultimately ends up.

Personally, I can’t add any helpful tips, since I purposely try to use credit for everything. Like you said, it helps keep track of everything not to mention the bonuses associated with certain cards (ie:extended protection, points, automatic transaction downloads into pf software, consolidating checking account outflows, built-in reports, etc.)

One thing that I did think of while reading your post, was the problem with poor money management. If someone cannot budget money, or has no self-control, what is to stop them from just going back to the ATM when the money runs out before the end of the month, especially if they never really had any kind of structure like that in their life before? I am always trying to come up with ways to help clients who have that problem change their mind set but it is very difficult for people to change their habits after years of consistent mismanagement.

We track ours in Quicken as “Mad Money”. We have a separate ING account set up titled “Terri’s Mad Money” and every paycheck, the specified amount gets transferred into that account. When I buy something, I tell my husband (who manages our Quicken set up) to take it out of my Mad Money and he transfers that amount back to our regular account to apply towards to CC that month.

A little more complicated than perhaps necessary, but it works well for us.

We set it up like that because, for me, once we went to a track-everything Quicken system, I felt like I couldn’t spend ANY money because everything had to be accounted for and reported to my husband (the Quicken gatekeeper), and apparently my husband didn’t have that issue. Heh. So this was a way for me to have money that I could spend without guilt or weird feelings.

$360.00 each month for me. That includes kids’ school lunches, dog grooming and pizza on the weekends. I always make sure I have a couple of dollars in my wallet. Mostly, I take out one dollar bills when I make this withdrawl from the bank each month. I always have dollars left over at the end of the month. I started doing this several years ago. Also, I never spend change. If I have to break a dollar, so be it. I always stick the change in a bag and every couple of weeks I have a nice, sizable deposit to make to my ing direct account.

I actually use the cash system for all my spending beyond rent and utilities. Twice a month, I get $400 which I use for grocery, clothes, beer/wine, eating out, vet bills, gas (although this is rather annoying, because you have to prepay, then go get your change after pumping), gifts, and anything else that isnt a utility or rent related payment. I actually started setting aside money out of this $400 for Christmas gifts as well.

It has been working very well for me. The first few cycles were rough (I was moving cross country AND getting a new puppy AND a maid of honor in my best friends wedding that fist go around). Luckily some of those costs were covered by employer/previous savings/ect, but it has gotten easier. I get paid 2 times a month, so occasionally there are 3 weekends in a pay period, and I have to be careful about spending in the first 2 weeks.

I actually dont track any of this money (ok I know). But I figured that I would first try to get the money to work out, then figure out the logistics later. Im not quite there yet, as Ive only been doing this for about 3 months. Maybe thats a good new years goal..

I agree with Eric. No need to track the items bought with the weekly cash. For myself, I take out $40 weekly (in Quicken, this category is Cash). My coworker does the same thing, and I’ve been following his advice: always take out the same amount weekly (or monthly). If you have money left over, put it in an envelope. The accumulated surplus can be used for weeks when you need more money. Or, if you build up to $50, say, you can drop it into savings. It’s a very simple system, and as JD says, there is no guilt about spending the allowance on lunches out, magazines, or yarn.

When my (now) husband and I first moved in together we merged finances. At the time I was a graduate student and he was well employed and making three times as much as my stipend. At that time I never felt like I could spend any money as I was not contributing as much (note: this was entirely my feelings and never in any way came from him either directly or indirectly). This frustrated him because he really felt that the size of our incomes did not indicate our contributions to the household. That was when we started an ‘allowance’. He gets paid biweekly and each payday we each get $100 cash to spend as we want, no questions asked.

Now I am done school, we’re married and have a small child. I contribute almost equally salary-wise but we continue to each withdraw our $100/biweekly. In addition we also withdraw $400/week to cover all household expenses (food, clothing, gifts, transportation etc). We find with two people on one account it was too difficult to keep track using debit cards all the time. In addition, we also are able to keep a very low fee chequing account because we use so few transactions per month.

As for keeping track of spending, I don’t bother. I figure that the allowance money is pre-determined to be an amount that is affordable, fitting in our budget for savings and our other expenses. I actually find it kind of liberating having this money that I know is ‘free’ to spend, no questions asked or permissions needed (either from myself or my husbnad).

We’re pretty meticulous about tracking every penny, except when it comes to our fun money. At the beginning of the month, I pull out cash for me and my husband, and that’s the last it’s ever discussed. It’s considered “spent” at that point. Throughout the month, we get to individually decide where we spend our own money. If I want to eat lunch out every day, I could probably do that. If I want to save it all toward a big fun purchase, I could do that, too.

My husband keeps his as cash in his wallet. I deposit mine into a separate checking account and use a debit card. I want to keep track of every penny, he doesn’t.

It works out well for us – we still meet our larger goals, have a strict overall budget, but get to indulge at our own discretion without having to justify it to anyone else.

Eric– what stops people from going back to the ATM is the same thing that will keep them from going anytime they want, with or without an allowance: A decision to do things differently. You can’t change their mindset– only they can, and their habits will change as a result.

We get paid weekly and I need to be accountable to the budget weekly anyway. For a while I tried to go without allowances–because I thought it was lame too– but my husband is a huge impulse spender with many habits I refuse to budget for, such as: “I need to drink Mountain Dew,” and “I’m surprisingly hungry every day around lunchtime, but I simply cannot anticipate that event before I leave for work.”

So I squeezed 80 bucks out of the budget for grown up allowances. As far as tracking, if you had kids, you’d be handing them 5 bucks a week, and you’d mark it in your budget as “Allowance.” Same with us, except we get $10 a week. Because we’re bigger. (We’re paid weekly, so my budget is weekly, and I need weekly accountability anyway.) I’ve found it’s nice too, because when someone asks me out for lunch, as long as it’s reasonably priced, I can go with no guilt.

I’m also all cash, because the point of cash and envelopes is you’re pre-tracked: 100 for food, when it’s gone, no more food. If there’s 10 left, you spent 90 on food. I have three teenagers and a job, and everything must work on the KISS principle as much as humanly possible. I don’t want to sit down to key a Kroger visit when I have ten bags of groceries to put away.

For me, an ATM pull isn’t an expense — it’s a transfer to the “wallet” account. Most of the time, the balance is accurate, down to the penny. And, no this level of exactitude doesn’t drive me crazy. In fact, I think it’s therapeutic. :-)

I’ve used Quicken since 1993, but I’ve never recorded the vague “Misc. expense”. I’d rather create a new category (or modify an existing one) than fail to label something properly.

Sub-categories are your friend. And sometimes, sub-sub-sub-categories (such as Home > Utilities > Internet > Fiber). Another example: every food purchase is sub-divided into either groceries, restaurant, lunch, snacks/sweets, fast food, or alcohol. That way, I know approximately how gluttonous I’ve been for any particular time period. And that ‘Quantum of Solace’? Easy: Entertainment > Cinema. (Not to be confused with Entertainment > Theatre)

I was of the same mind as you were until I forced myself on an “adult allowance” about 6 months ago after I changed jobs and had to switch bank accounts. Instead of getting my salary paid into my personal account and then paying the bills from there, my salary is now deposited into the family account. I set up a personal account separate from the family account and transfer a certain amount each month. I use this money for all costs outside of the family spending: public transportation, entertainment, breakfast and lunch (while at work), gym membership, etc.. The rest of the bills are payed from the family account.

I keep a detailed spreadsheet on Google docs so I can update it from work or from home. I add an entry in my spreadsheet for every penny I spend, so that it doesn’t matter weather I used my debit card or cash.

For me, having a lump sum labeled as “Misc Expenses” is just not detailed enough – I really want to know exactly what I am spending my cash on and where I can reduce my spending. It took me a while to get used to keeping track of what I was spending, but it really has changed the way that I spend money.

As a side benefit, I also started keeping track of how much Coca-Cola I drink (on the same Google docs spreadsheet). I knew I drank too much Coke much but never really kept track. I was surprised to find out how much I actually drank and this motivated me to significantly cut down my consumption (from 2.5 500 mL bottles a day to 0.5 bottles a day).

I have two separate checking accounts, my ING account covers the things I need, and my local bank account covers my wants. I have a small portion of each paycheck direct deposited into my local bank, but the majority of the money goes to the ING account. I never thought of it as an allowance, but I guess it really is. This way I can use the debit cards for both accounts to track both wants and needs, but still keep them separate.

The adult allowance, or mad money as we call it, works very well for us. Although it took several months of adjusting to find the right amount for my husband. We had to keep raising the monthly amount to fit his spending. But he still spends far less using cash than he did before. He’s gotten in the habit of only carrying a small part of his allowance with him. It helps him manage the money and make it last.

As far as tracking, you do have a general idea of what you’re spending the money on. If that category gets to be a problem then you can keep a diary or save receipts for a month to get a more detailed picture.

Amounts and spending. As a stay at home mom to a preschooler, I receive $60 per month to spend on entertainment for me and my daughter. This is enough for 1 fast food meal for 2, 1 coffee shop trip, one fun kiddie event and maybe a dinner out with friends. My husband receives $75 for lunches and dinners out and a haircut. Like I said earlier, it took some adjustment for my husband. He was used to eating lunch out all the time and charging several hundred dollars on the credit card. It took about 5 months of adjusting before we found the sweet spot of $125 a month. To support him, I made sure all weekday dinners produced leftovers, packed them up for him, and encouraged him to buy food to keep at his desk. A few months ago we needed to cut spending and he adjusted easily to spending only $75 a month.

It was sort of rhetorical question but your reply was specifically my point–no matter if you use envelopes or allowances or any other tricks, it makes no difference if the person isn’t committed to changing their ways. And it’s not like I’m out trying to change people (if that’s how it seemed), many clients come looking for help in changing their mindset. They come in complaining of an inability to save or to control their spending habits, despite using all of the so called “tricks” that get mentioned in forums and pf blogs, but to no avail.

Anything that helps you exercise more control over your dollars is a good thing. Remember there is an entire industry (advertising) devoted to separating you from your money. Many of the things they do ride the line of morality. Of course the more you want to be in control, the more control you will have, but like anything else, it is always one day at a time.

I use Quicken and treat cash withdrawals as “entertainment.” It is basically always eating out, drinks at happy hour, a coffee in the morning, stuff like that. These are things I consider as luxuries and non-necessities. Not tracking every penny of it makes it more enjoyable. Month to month I look at my “entertainment” expenses and gauge if it is to high or to low and adjust. I don’t have a set amount that I start with, but the idea sounds good so I may try it. Good article.

Regarding tracking of cash payments i just use my mobile phone, something that all of us have always with us so at the moment i make the payment i take out my phone and i create a memo (on daily/weekly/monthly basis depending on the level of detail e.g. personally i don’t care on which day i spent the money but only for totals on a monthly basis)and then once a week i just copy the numbers to the excel file i use to penny track my expenses.

We have been doing this for about a year now. Just Â£50 each a month for ‘fun stuff’. The reason being my husband is an avid collector of DVDs, books, magazines whereas I am not, and he would feel guilty that he was spending more than ‘his share’ of our combined income. Now we both have Â£50 to spend guilt-free each month!

I suspect that people have a tendency to spend all the money labeled as “fun” or “allowance” money, whether it’s on many small items or one large splurge during the allowance timeframe. If you have money to burn, then it’s not a problem. If you’re trying to build up your savings, however, this could become the proverbial hole in your pocket. It’s the little things that keep people from controlling their spending.

While $200 a month doesn’t seem like much, it becomes $2400 per year spent on unlabeled non-essentials. And if both spouses give themselves an equal allowance, that becomes $4800 per year per couple – or $9600 after only two years.

I also suspect that an allowance isn’t the only money spent on “extras”, since it’s very easy to throw extra items into a grocery cart that become part of the bill labeled “food”. (Is wine an extra? How about chocolate chips? It’s a fuzzy science.)

So, I don’t subscribe to the allowance idea, because it feels like a license to spend money I wouldn’t otherwise. Just think how much financial security people would have if the same actions that get them out of debt were continued for years after becoming debt-free. If you can get a thrill from saving money, make it a challenge to see how much of that allowance you can keep to place into savings at the end of the month.

I’ve always done the “adult allowance” thing because it prevents me from using my credit card.

Here’s how I do it: I simply take out $60 per week and use it for gas, occasional coffee, etc. This may sound a little extreme, but I don’t buy lunch or do much impulse shopping, so I usually have some cash left over at the end of the week.

I would suggest folks try it for a week! Oh, we live just a few minutes outside the largest city in the US (so it can be done!).

Eric (#14) wrote: One thing that I did think of while reading your post, was the problem with poor money management. If someone cannot budget money, or has no self-control, what is to stop them from just going back to the ATM when the money runs out before the end of the month, especially if they never really had any kind of structure like that in their life before?

Yes, this is very important. I think this is an example of doing what works for you and your situation. This sort of allowance would not have worked for me a decade ago. For one, I was basically living like this already, but pulling the money whenever I wanted it and spending it willy-nilly.

The only reason the adult allowance works for me now is that I’ve manage to tighten the screws on the rest of my financial life.

We’ve just created a budget (after finding this blog and getting informed about personal finance). Things are tight and our expenses are high (daycare for 2 year-old twins is as much as our mortgage!). My husband and I each get a $20 allowance each week for discretionary spending. This would include lunches out, beer or wine, a cup of coffee or tea. We had to eliminate dining out from our budget. So if we want to go out – we save our allowance and combine forces, so to speak. Any unspent $ is saved in a mad money jar. We used our last mad money jar stash for a date night to the movies when my Mom was in town (free babysitting!). It’s fun to see how little we can spend throughout the week – definitely motivates us to pack our lunches!

I don’t use an adult allowance per se but I do all my household spending cash. I keep track of if by requesting receipts and marking it in a small note book. I divided into 4 catagouries Gas Shopping Misc and Coffee. For misc expenses car repairs, new running shoes etc I simply note the amount at the bottom of the page. end of week and month I add up all the expenses.

I find this much easier to track my spending this way than with the computer.

Jeff (#28) wrote: Does anyone use the extra money left over as â€œrolloverâ€ money? – ie: saving money for a big ticket item and not buying it until you have saved enough of your fun money to justify it?

I’ve thought of this, but because I’m new at the allowance, I haven’t actually done it. I’m not sure how this would work for me, though. The really big things that I want to save for — like a car — have their own special subaccounts that I’m using. Of course, one thing I could do is if I have cash at the end of the month, explicitly re-route it to the car account or the vacation account or whatever.

I’d like to piggy-back on what JD just said in #36. I used to spend willy-nilly (as long as bills were paid). I used to think that $2-3 ATM was reasonable and really didn’t care about the fee. Since I’ve “tighten the screws” on my personal spending and budgeting, I rarely use an ATM that charges me a fee. That alone is probably saving me $100-150/year. I think you need to “tighten the screws” before you can start experimenting with allowances and such.

I absolutely roll-over our blow money. We get a new set every two weeks regardless of what has been spent before.

I do not think it is a license to spend money that I wouldn’t have spent otherwise. First, in my case, we are talking about a whopping $10/wk! Second, going out to lunch once a week is something I have done for YEARS and this just puts that expense into the “allowance” category.

Extras can be thrown into the grocery cart, but since the amount budgetted for groceries (also in cash) is also finite, there is a limit to how many extras can be put there as well. A 99 cent can of pringles is much easier to add than a case of beer.

It really all comes down to having a plan and having the desire and discipline to adhere to it!

Ask for receipts, update your “misc” (which I would retitle “untracked”) entry with the amounts you’ve spent so far each time you’re using Quicken and at the end of the month you’ll either have a balance remaining in Untracked equal to the amount you missed tracking or you’ll have cash in your pocket of the balance. It’s just like reconciling the petty cash for a business. You can continue to update it as it’s spent even if you exceed the end of the month to do it. This way you track what you can and it’s still no more hassle than updating your downloaded debit/credit spending.

Love the idea of adult allowance. We have been using the cash allowance system for about a year. It has actually improved our marriage! My husband and I each get our $$ at the beginning of the month, no strings attached! We each spend (or save) the money as we see fit and everyone is happy.
Toni

For recording these transactions I put in my money management program ATM withdraw and then SPLIT the individual transactions that I have saved with paper receipts. The effect on my monthly report is that I have an account of every penny spent and the category.

I love love love my allowance. It’s one line item in my budget and I don’t track how I spend it. I give myself $200 per paycheck (so basically $400/month) which is supposed to cover all food and wants.
Since starting to give myself an allowance, I’ve seen my bank account grow substantially. I don’t think I will ever go back to using my debit card as “cash” again.
Do I sometimes go over and use my debit card? Yes, but because I have this allowance it means there is always wiggle room in the back account since it restricts my casual spending so much.

Been using “allowance” ever since my husband and I combined our money (I think it’s even more important if you have joint money to have some of your own). We keep it in separate accounts and use our debit card to access (neither of us keeps a lot of cash on hand). I like to keep a sizable balance (in case I have a bigger want) while my husband is usually at zero. I really feel that our allowance has kept the financial peace in our family.

Next year we’re also going to try going to a cash allownce system for our household wants. I just read All Your Worth (thanks for the rec. JD) and we’re working out the system to fit our situation. Wish us luck.

My wife and I do this, I find it avoids conflicts about how we spend “our” money. We get $100 each a month in “Fun Money” that we can spend however we feel like. All other expenditures generally have to be agreed upon.

I’ve been bad about tracking my cash spending as well. I try to track everything in Quicken, and whenever I hit an ATM, I record it as a transfer into my Cash Account. Of course, then I have to record my cash purchases. I used to just do a couple of lump expenses every month or so to reflect what I felt like I had spent money on (usually dining and entertainment).

What I’ve started doing now is keeping a small post-it note in my wallet and recording what I spend, rounded up to the nearest dollar (since I keep a change bucket). “12/1 – Coffee – 2, Lunch – 8”

My wife and I have also implemented an adult allowance, though I find it somewhat difficult to stick with for 2 reasons: 1) I always have my credit and debit cards in my wallet. 2) To earn the higher interest rate on my checking account, I need to use my debit card for 12 purchases a month. Inevitably, I use my debit card for lunch purchases when I should be using cash. But what I do instead is take out less cash for my allowance (say $60 instead of $100).

Tracking every penny (including cash) is an important tool in Debtors Anonymous. Given that, when I started in DA, I put an index card in my wallet. The ATM receipt as Lee (#50) suggested would work just as well. For the few cash transactions where I don’t get a receipt, I scribble down how much I spent and on what. I have a separate “Cash on Hand” account in Quicken and I enter my cash spending there the same way I do in my checking account.

I guess it depends on your personal circumstances, and how closely you want or need to track your spending. Closely tracking even “fun money” sounds like a “no fun” deal, but it can also be a lifesaver.

DH and I have had “allowances” for years, and I agree with Adrienne that it’s very helpful with combined finances. We pull out a set amount of cash every week for the two of us ($100/week total), and no questions are asked. We’ve had long stretches of having one wage earner (school, kids, etc.), and giving both of us an allowance meant that neither person got “more” because they were caring for the kids and managing the household instead of working for pay.

Another major benefit of allowances for me was that I no longer have to see his vice spending (junk food, soda, cigarettes (!) ) on our credit cards. If he wants to spend his money on those things, then it’s “his money”, and he has to prioritize those items over other choices and use only the cash on hand (same as the kids and I do).

Hmm I don’t do this but I think it’s interesting. One issue we have with our current situation is that since I am very conscious of our budget my husband says he feels like he can’t buy anything for himself even though I say go ahead as long as you track it. It’s good that he’s not naturally a spender, but I don’t want him to feel like he can’t. Maybe if he got an adult “allowance” even if $100 a month he will feel more autonomy from the tyranny of the budget.

I’m really bad at every-penny tracking, so I give myself 100 bucks a week and out of that comes fun food, comic books, concert tickets, et cetera. I transfer the money to my checking/debit card account on Thursday night, and it’s the only money in that account so when it’s gone, it’s gone.

Our system is a little different, but along the same lines. I go to the ATM once a week and withdraw $300. Immediately afterward, I head to the grocery and complete any other miscellaneous errands. Anything left is mad money, which I split with my husband. It may seem like a lot, but using this system, my spouse and I managed to squirrel away $45k in two years, while also saving for our kids’ college expenses and fully funding his 401k/my IRA. Unlike some earlier posters, I don’t consider this wasted money, and I don’t feel the need to track it. Our savings needs are already met, so why not enjoy life with the amount that remains? I think the adult allowance is a great idea!

Although I don’t necessarily do an adult allowance, I do track my cash expenses. For example, yesterday, I had around $100 cash combined from two sources, and planned on spending it on Christmas presents. I went to my Quicken, and “deposited” (in Quicken) $30, which was my friend owing me for dinner (which I tracked to credit the dinner category, so it would show that I technically didn’t spend $30 of my original amount in that category). I then “deposited” my $70 from an odd-job, and tracked it as salary. I then “withdrew” the money as CASH and used the category of gifts. Since I used all $100 for gifts that worked just fine. Otherwise, you have to save your receipts and go back to “split” the transaction to truly represent what you spend your cash on. It may seem tedious, but if you are hyper-organized with your money as some of us are, you will appreciate how accurately it reflects your budget/spending (I use the categories in Quicken because I keep my budget in Quicken, so I can run reports and see where/how I have spent my money, and where I need to cut back on). Since I get paid cash sometimes for odd jobs (tutoring), I often make sure to “deposit” and “withdrawl” it from Quicken to see that I am earning extra money, but also what I am spending it on!

I usually only pull out cash for the farmers markets (as part of the food budget), because I didnâ€™t trust myself not to spend it otherwise. Lately, I decided to keep an extra $20 to see how long it would last and surprisingly, it can last up to a week. Coffee to me is a luxury, something to splurge on during the weekend so youâ€™ll never see me running to the local cafe daily so that doesnâ€™t eat up.

Iâ€™m big on debit and credit cards, so usually even small purchases (like a $8 bottle of wine) goes on debit or credit, but I track everything anyway.

I do much the same. I take out $120 every 2 weeks for gas and groceries (I live alone). What ever I don’t use on G&G, I get to spend. Needless to say, there usually isn’t much left over and so it goes into my “savings” jar. After a few months there is enough there to purchse something special.

When I take the cash out of our account, I put it under ATM/Cash. I track my expenses on my phone’s notepad. I keep the date, amount, and abbreviated description. When I input these (at least weekly), I reduce the ATM/Cash category for each transaction I recorded and put them into the appropriate categories (eating out, entertainment, etc).

My husband and I have had allowances for years. We each get $60/week. DH takes his out every week; I get mine every pay period, so $120 at a time. This money is not to be spent on budget items like groceries or gas but on anything else we want — NO QUESTIONS ASKED!

I’ll usually only carry $20-40 in my wallet because I want to save up to buy something more expensive, such as a new camera, tripod, etc. I also use my cash for a monthly massage, lunch with friends, or a new book. My husband uses his cash to play golf, save up to buy new golf clubs, and for cash business expenses. After his company pays him for his expense reports, he reimburses himself for the cash he spent.

In Quicken, I record this as Allowance-Barb or Allowance-Mike. That’s it. Very easy to keep track of and no need to feel guilty spending money on yourself when there are so many other pressing needs around the house. We all work hard and need to feel that we get to enjoy the fruits of our labor on a personal level.

I have a “cash” column in the Excel spreadsheet I use to track my spending. When I make an ATM withdrawal I note that under the “Out” Column from the appropriate account (generall checking), and then when I spend the cash, it goes under the “Cash” column. This was helpful because, during college, my grandparents would “help with gas” by stuffing $20 bills into my hand as they left. Thus, the money I was spending never technically went “into” the bank – just my wallet. I’d usually spend it on gas within days, and it got tricky for me to differentiate between money that had come out of the bank versus “presents”.

My system is to overbudget all my expense categories by $10-$20. It doesn’t sound like much, but it adds up to a couple hundred bucks every month. If I’m under by $100, then I just roll that over into savings. If I’m particularly good at reining in my expenses and save more than $100, I’ll let myself use it for a want item.

This way I’m always spending what I know I’ve already saved… just my own peculiar psychological trick, I guess.

In terms of the actual money, I don’t give myself a cash allowance, since I get rewards for just about everything I buy on my 2 credit cards (which I always pay off in full). Mint is also super helpful at tracking my spending, but since my variable expenses are groceries and occasional gifts, it’s not too hard for me to ballpark what I’ve spent each month. I’m sure that will change drastically once I have kids!

I use the cash that I earn from my small home business as my spending money. Everything else is paid out of my full-time job earnings. I find that by using cash, and using only the cash I earn from my home business, I am much more discretionary about how it is spent.

I use pocket quicken on my Palm PDA to track my cash expenses. I quit caring about the pennies and only track whole dollars in or out. So, if I throw in change to cover a $5.37 cent item, it is only $5 that gets tracked. Conversely, If I didn’t have enough change, I would track $6.

You can set up an expense category for your allowance to help track how much you have left.

I instituted an allowance system ($40/wk each) for the two ends of the spectrum listed here. I am a penny counter and felt guilt every time I spent money on myself. And DH doesn’t pay any attention and would constantly overspend if he wasn’t limited to cash on hand. This also ended an ongoing disagreement about a reasonable number of times to eat lunch out every week.

We have also instituted a cash system for entertainment and eating out.

It was pointed out that taking this much cash out of the budget is a lot of money to “waste”. I think we all need to waste a little money. Unless you are one of those people that enjoys self deprivation, one of the biggest budget busters is going cold turkey and not spending any money on yourself. Because of this I have actually noticed my budget tightening up.

I refuse to try to track this money because a) it would make me feel guilty for no real reason and b) it would be next to impossible to get DH to account for his spending.

This personal budget money is primarily for lunches, but it is understood that toys must come out of this as well. I recently bought “Dance Dance Revolution” for myself out of this money.

Leftover entertainment/eatout money is treated similarly. It goes into a tin and might be used for those rare weeks that we go over budget, but otherwise it is intended as spending money when we go on vacation.

Incidentally we use a similar system with space. DH is a collector and has all sorts of stupid items and toys that I want him to get rid of. Now we each have a space “budget”. If it’s in his footlocker I don’t care if he keeps it, but it keeps him from taking over the whole house with “stuff”.

This won’t work for everyone, but you mentioned the reason it works for me and might work for you: guilt. I don’t spend a lot of extra money and my husband spends next to none, with one exception. We love to go out to eat. So instead of “fun money” we just pay for all food (from groceries down to gum and snacks) with this cash. It lets us evaluate whether or not we really can afford to go out to eat. The best part is, when we can, it is completely guilt-free.

I was worried about how this would work at Costco, for example. It was pretty painless to separate my food items from everything else. If I was using multiple cash groups, though, it might get more complicated. Since mine is food, I mark it as food when I withdraw the money.

The biggest downfall of working with cash is tracking where the cash was spent. In-order to track it you either have to keep track of all your receipts or just guestimate what the cash was spent on. This is a constant issue I have, because like you I track ever penny spent. My wife especially takes advantage of this “loophole” in my finance tracking, she will occasionally takes out cash if she is purchasing something that she doesn’t want me to know about. I guess Adult Allowance might be a solution, but tracking is still a hurdle of mine.

The Quicken issue is actually pretty easily solved. I set up a Cash account in it — as I recall, it’s a distinct account type — and when I withdraw cash, I categorize it as [Cash], transferring it. Then I just categorize my cash expenses normally. So long as you’re already in the habit of updating Quicken frequently, it’s really not that hard to recall what you spend. (Or you can keep your receipts, whichever is easier.)

As for controlling how much money I spend, that’s easy for me. I don’t have an ATM card for my main checking account, and my bank is inconveniently located. If I need cash, I have to write a check, deposit into my account I /do/ have an ATM card for, wait a couple days for it to clear, and then make a withdrawal. It’s a hassle, but it does keep me from loading up on cash whenever I feel like it. :)

I understand Trina’s point (#34), but one thing that really helped get my finances under control was accepting that previous budgets hadn’t worked because I’d failed to take into account my own personality. While some people thrive under very strict budgets, I found that I’d do well for 2-3 months, and then I’d fall off the wagon, usually in a very big way.

When I finally got serious about improving my finances, I found that I had a choice. I could go hard core debt reduction all of the time, and theoretically eliminate my debt within perhaps 3 years, or I could go “slow and steady”, paying it off over a longer period of time. I recognized that while the faster schedule is technically better, it would be hard for me to keep up that level of motivation over a long enough period to get rid of the debt. 6 months? Maybe, but definitely not 3 years.

Without going into a long drawn out explanation of the journey that I took, I eventually settled upon a combination of strict and permissive budgeting. It works really well with my personality, because while I’m making serious inroads in paying down my debt, I don’t feel that frustration and deprivation that sabotaged previous debt reduction attempts. In turn, the positive rewards of staying on the budget over the long haul have helped motivate me further, so that over time, I’ve actually reduced my expenses even more.

To explain, my monthly budget includes a very strict payment that goes directly towards my debt reduction. I’m on a set schedule and I will be fully paid off in about 3.5 years. It also includes a payment towards our baby emergency fund. Those expenses are non-negotiable. I do not allow myself to spend a dime until I’ve covered them.

On a weekly scale for personal expenditures, I use a “Cash Envelope” system. I take out a weekly amount that covers my lunch and any other sundries. It’s budgeted loose enough that I have around $10-20 that is sort of a contingency fund, so I can cover an unexpected situation, like having to pick up some batteries. Any money that’s left over at the end of the week, as well as my change, goes into “The Can” which is literally just a coffee can, and is my “free-to-spend” cash. Sometimes I use it to cover a night out with friends, other times I save it up for something exciting, like the digital camera I bought last month.

In my overall budget, I also allow for larger indulgences, but once again they are fully budgeted for. As an example, I knew we were traveling this past summer to celebrate my parent’s 50th anniversary. I determined an amount that I needed to save, both for the travel itself and for fun and entertainment while on the trip, and I worked for about 9 months to save the full amount. I was able to have a fabulous time on the trip without any financial worries. The best part was that because I budget generously, I was not only ready if we’d had an unexpected expense, but when we got home, we then had a nice surplus to put towards general household upkeep.

I have very few “discretionary expenses” short of eating out with my girlfriend. I work in the entertainment industry so things like movies, books, comic books, and dining out with most of my friends (who also work in the industry) are business expenses and budgeted and accounted for accordingly.

All spending on things like entertainment get tracked like everything else, save the receipt and reconcile at the end of the day or end of the week.

By crafting a lifestyle that allows me to write off the majority of my spending (effectively halving the costs per item) gives me a much higher percentage of my income available for these things.

I thought it was a silly idea at first myself, but it has SAVED my budget. I’m really new to budgeting and controlling my spending (childhood background did not include much in finances). Having that $25 a week allows me to get things that I would feel guilty taking out of our joint account (makeup, ladies?). At first I just used it for lunches out and snacks but then I start to realize that I can use that for my own little ‘savings goals’. I now am putting half of my “fun budget” in a HYSA to save up for an all out, expenses paid trip to Disneyland as a birthday gift for my sister. Eventually it will come out of our joint, but as my DH’s job just cut his hours, we agreed that for at least a couple months it would come out of my fun budget and any extra we had in the budget at the end of the month.
My DH didn’t really have anythign against having a fun budget for me but didn’t think it would work for him. But now, after 6 months, we’ll probably get one set up for him for his 360 games and whatever else once his job is figured out.

Can someone please explain the obsession with tracking every penny? Once the big budget categories are paid, including savings, what does it matter how exactly you fritter away a cash allowance, as long as it shows up as an expected expense?

In my case, I don’t care whether I spend my allowance on a book, a coffee, or a dessert, and I’m not sure it matters in the long run.

I guess I could see tracking those expenses over the short term to see if I needed to create or increase a budget category (e.g., if I notice that I’m using my allowance to purchase gloves for the kids, then perhaps I need to increase the annual clothing budget); otherwise, I don’t see the point. It seems like a lot of busy work to me.

For awhile, I was withdrawing $40 in cash per week and not really paying attention to where it went, but I had trouble with that. Not trouble in the sense that I overspent, but trouble in that not every month has 4 or 5 exact weeks and I budget monthly. So, one month I would have 4 withdrawals and one month I would have 5, and so on. I wanted to be working with the same amount every month for “fun money.” Then I read an article somewhere about how people don’t realize just how much they are spending on going out to eat. Now, I have never been one to go out to lunch every day, but I do love a Jamba Juice or a Starbucks, or a dinner out more often than I should. So, I tried to limit my eating out to $10 per week, but I am tired of having to keep track of “eating out” cash separately from the rest of the “fun money” cash. So, I think I will withdraw cash twice a month–$60 on the 1st and $60 on the 16th for a total of $120 and use it for eating out as well as other fun stuff. Once it is gone, then I stop.

Karen wrote: Can someone please explain the obsession with tracking every penny? Once the big budget categories are paid, including savings, what does it matter how exactly you fritter away a cash allowance, as long as it shows up as an expected expense?

Well, as for me, I’m curious, not obsessed. I like to know where my cash goes, especially on things like eating out at work. I also like to record when I make cash, like by selling something on Craigslist. I don’t bother tracking change, I just round up to the nearest dollar. It helps me keep tabs on myself, since I don’t use an explicit allowance system. (Although I do budget for “misc,” aka “I forgot what I spent this on.”)

My husband and I have joint checking and savings accounts. At the beginning of each month, we each get $175 allowance. I generally use mine for dining out when he’s not joining me (dining out together comes out of our joint account). He generally uses his on miscellaneous guy stuff. Gas, groceries, etc. all come out of our joint account. I track everything by category except his allowance … I don’t look at anything related to his personal checking/savings/creditcard.

To Karen (#77) – the “obsession” is because the only way to make changes to your spending is to know what you’re spending your money on. For you, books, coffees, and desserts all seem to fall into the same category of “treating yourself”. Do you think you’d ever like to know if you’re spending $100 or $500 on the “treating yourself” category? And if it’s actually costing you $2,000, maybe there are other things you’re wishing you had $2,000 for.

If someone’s giving themselves an allowance, then it probably doesn’t matter that everything in it gets tracked, if they know it’s their “things I don’t really need, but want to budget $xxx to waste on” category. Personally, I want to be able to see whether all my money has gone to fast food or RedBox, and how much I could save if I brought my lunch to work more often.

You sort of answered your own question. Budgeting and tracking for the short term allows you to make needed adjustments as time goes on. By analyzing spending in the near-term, you have the flexibility to make budget adjustments to prevent issued in the long run. The problem with only looking at the long-term is that by the time a problem arises, it may already be out of control where steps could have been taken to prevent problems by paying attention to near-term spending as well.

I think perhaps I inappropriately used the term obsession earlier, and I apologize. I also temporarily forgot that not everyone is at the same point in their financial lives. I’ve stopped categorizing those little indulgences, other than as my allowance, because it no longer matters to my long-term financial health. I forgot for a moment how I got here, and a lot of it centered around tracking every penny when I was younger.

@Eric…You make a good point. Spot checking is something I still do to make sure I’m on track, particularly when a budget category is pushing its boundaries.

My son and his wife were having trouble because she was spending a lot on wants. I suggested that they each get an allowance to avoid overspending. Since both of their paychecks vary due to overtime and sometimes cutbacks they each take a set percentage as their allowance each payday. When they work more they have more spending money.
I use an envelope for my allowance. As I take cash out, I put the receipt in or write the amount on the outside of the envelope and what it was for. When you see a dozen $2.00 or less receipts it is time to rethink what the heck I wasted money on.

We’ve been doing this for quite a while now, and we call it “Mad Money”. This has been one of the best things for our marriage. Here’s how we do it:
I use GnuCash to keep our accounts, which is great because you can create sub-accounts. We have a Cash account, subdivided into my mad $ account, and his (we do the rest of our spending with debit or credit, and pay it off each month). We each get $40/month, and it goes in an envelope. Birthday money also gets deposited here. If my husband wants to carry some of the cash with him, he can write a note on the envelope to say that he withdrew, say, $20. When I sit down to do finances, I log it as an expense, and, as far as I’m concerned, the money has disappeared. Then he gets to spend it on whatever he wants. Before we did this, he felt very constrained, as he had to report every little expenditure, and felt dumb for not remembering exactly how his $20 became $12 in his wallet.
It definitely adds up, though, and we each find ourselves not spending for a while, and then splurging on something we feel like getting. We end up spending it largely on hobbies, snacks, entertainment, and supporting little causes here and there — like the 4th grader going around doing a fundraiser, and sometimes bigger causes.
My husband often comments on the fact that, since he knows it’s there, he doesn’t feel the need to spend it. It’s just comforting to know that *if* he wanted to buy a Wii, he could.

It is, actually, a personal finance makeover of what, in the world of business, is called “Budget”.
Every little project is funded through an overall resources allocation. If every project meets the budget, there is no overspending risk at global level.

This is how my husband and I work our finances as well. We each get an allowance when our paychecks are deposited. That is all we have for the ‘wanted’ things. It has worked wonders for us and we never bicker about what the other spends money on…none of our business since it isn’t coming out of our joint bill pay money.
THanks!

I use a variation on the allowance system. I have multiple sources of income – a full time job that pays exactly the same amount every week, and a couple of part-time jobs that pay variable amounts every week or month or so, depending on how much I’ve worked. I also have a variety of expenses – some extremely regular, like my rent and phone bill, and some variable, like groceries, entertainment, and clothes.

Fortunately for me, my fixed expenses are significantly less than the income from my full-time job, so couple of months ago I decided to start using my fixed income to pay my fixed expenses (and make automatic savings deposits) and use my variable income to pay my variable expenses. Everything happens automatically for the fixed expenses, so I know so long as I have my job (fingers crossed) I never have to worry about not having money for the expenses that are non-negotiable (I include my utility payments with the “fixed” expenses even though they actually do vary a little bit).

My variable income I have directly deposited into a separate account from my regular paycheck, and I use this account to pay my credit cards, etc. I try to keep around $200-$300 in the account at any given time – any extra I roll over into my vacation savings account, so it still stays fun money but I’m spending it on what I think of as “deep” wants rather than shallow, right-now wants like an eggnog latte or something.

I haven’t been doing this for long – it may well break down the first time I need/want a new coat or some other big-ticket item, but so far I’m really enjoying it. It has taken away some of the guilt I had about spending money on frivolous things, and it has also helped me feel OK about taking days off from my part-time job, since I know I won’t be needing the money to pay the landlord or Sallie Mae. And my vacation account is growing fast!

We used to do this… take $50 for each of us each month (I know it doesn’t sound like much… but it worked for us)… My husband is a spendthrift and feels as if he can’t EVER buy anything! SOOO giving him the money made it OK to use it however he wanted…Plus at the time he smoked and there was NO WAY that money was coming out of OUR MONEY! I on the otherhand, didn’t usually spend mine and would save it for later or give it to him! We don’t do that anymore and really need to get back to it…
BUT that may take awhile since we are just trying to make ends meet!
To comment #34 I must say this…..

I think it is OK, to spend money on yourselfs… WHY WOULD YOU WORK OTHERWISE???
Even if it is THOUSANDS a year… WHY work hard otherwise???? That is why it is called FUN MONEY afterall! I don’t think it needs to be tracked or anything! Putting FUN MONEY or ALLOWENCE in your budget… that IS tracking it! Unless you really have a spending problem or really want to know where it goes, then I don’t see a problem just spending it!!! When you take it out, it is tracking ALL the pennies from it! KWIM!?!?! Like someone said,,, the allowance I give my kids… I don’t keep track of! They get the money to spend on what they choose, I do however try to remind them HOW LONG it took to save the money and help them make good choices!

We do what J does. On each paycheck, each of us retains a portion for personal spending. The rest goes to a joint account. From my personal spending, just over 30% goes directly to an mma. The rest is there for me to get cash out or eat out or whatever. I also have a credit card with reward points, so I try to do most of my purchases on that (which is easy since I do a lot of online shopping). I pay off my credit card first thing in the month. At the end of the month, anything left over $50 goes into my mma. This has worked well to improve my personal savings, and I was able to buy a laptop a few months ago. Every few months I go clothes shopping and spend a couple hundred in one shot. I don’t eat out much anymore (recently got on track with nutrition and weight loss). I use my savings to buy Christmas/birthday presents for my husband and “Santa” gifts for the family, which are things I want but the household doesn’t need, like replacing our flatware or glasses (shh, don’t tell anyone!). I don’t track my personal spending or balance my personal bank account.

I lived in Japan for a year, which is completely a cash society and forced me to get a handle on my spending.

I had one budget for all my spending ~$25 a day, and that covered everything except for utilities and my transportation to work (which I was reimbursed for). I carried a small notebook with me, and had the date on the top of each page, and wrote down where every yen went. I mostly just filled it out during my train rides. This system worked perfectly for me, and I could easily decide not to buy coffee, or a magazine, and instead carry over that days extra amount to save for something bigger.

This is just like a small envelope system but for only one of your categories – ‘Entertainment’. Sounds like a good idea to me since I also only use plastic and sometimes I’m not sure how much is left in my entertainment budget for the month.

I currently don’t use the allowance method, but I like the idea. I find using my debit card allows me to better track my spending, but I find myself often overspending while doing this. I do use cash for many things, but I wouldn’t call my set up an allowance. I have been using an iPhone app to keep track of my spending and you can see my experiences here http://www.lifeisnothard.com/money/spend-iphone-budgeting-app/. I always have my phone on me, so it’s easy to quickly pull it out and enter the transaction when I’m out and using cash. I then put those transactions into my desktop budget program at the end of the week.

I used to think that it was lame too until we started it back in October. Now we are hooked.

We each get $200 a month. We can spend it on aything we want, no questions asked. They include dining out, shopping for wants, movies, gifts etc. Of course, it is each person’s option to save for a bigger item. This month, we opted to buy a printer for Christmas so we contributed $70 each towards it. That left us with $130 each for other stuff. My husband is actually saving all his extra money to buy a $1300 camera.

I highly recommend this method. No guilt (for the most part) but still within the budget. This is the amount we agreed upon and so far it is about right.

We also use cash and it is up to the person to track spending. I track mine on Excel because I want to. He loves just accummulating his money for the camera without tracking.

Also a recent convert (just a month in). It’s working out well and helping me deal with my overdeveloped sense of cheapness.

The cool part is that I’m realizing that while I love to daydream about buying this and that, when it comes down to parting with cold, hard cash, there are very few things in the world that I actually want to commit to. I’m finding that my needs are simpler than even I thought.

We each have a separate bank account that we move our allowance into. I only use debit, because I like that I can track easily that way.

But what you could do is set up an allowance account, put you $200 in it, and then withdraw $20 or so. Anything that rings in at less than, say, $3 (like a coffee) you pay for with the cash. Anything bigger you use the debit. If you blow through the cash, withdraw more (but obviously staying within your allowance).

At the end of the month, if most of your allowance is tracked on your debit, then you’ll be less likely to worry about tracking that $20 down to the penny. But if all of your allowance went to piddly purchases, then you know you should probably keep receipts to see just how many coffees you’re buying in a month!

“For now, Iâ€™m just logging it in Quicken as $200 in â€œMisc Expensesâ€ when I make the monthly withdrawal.”

I haven’t been doing the “allowance” thing, but like the idea. Whenever we make a cash withdrawal, we will save the receipts for even those purchases, and go back and “split” the withdrawal into the respective categories (e.g., $40 withdrawal, $30 on haircut, $5 dining, $5 entertainment). So you can do the “misc” initially, then go back and change it later on so you can still track every penny.

You know those cheap pocket shoe organizers for closets? I converted one into a receipt organizer, with each pocket being a separate expense category. When I get the receipt from the clerk, I take a moment to write on the back of the receipt the date, what I purchased, and how much I spent. (The register ink has a tendency to fade.) Then I file my receipts in the correct pocket when I get home.

While these expenses may seem minor, they can add up to horrific totals. Dining out is a luxury many can ill afford in these hard economic times, and finding out you spend X dollars that could be better used elsewhere is worthwhile to note.

We prefer to live on a cash basis, paying only necessary expenses with deposited money. We rarely get into financial hot water this way. The receipts help us track where those minor dollars might be adding up to major expenses.

My husband and I do this. We only get $130.00 each a month because of the budget. There also have been times at the beginning of the month when we’ve agreed to forgo some or all of our allowance that month because of larger needs. For myself, I have individual ING accounts for personal spending. For example, I have an account for spending on my husband – when it comes time for his birthday or Christmas, here is money that has been targeted just to spend on him. I’m also using this to save toward a camera. In addition we each have individual checking accounts (in addition to a joint checking account.) Whatever doesn’t get spend rolls over into the next month. Tracking is easy because I record all of my debits.

Allowances = marital harmony. All our paychecks go into the household kitty, then we each get an allowance check to spend as we wish. The Budgeter doesn’t freak out about every penny the Spender spends, and the Spender actually gets to spend freely!

For a person that lives on basically plastic, I have a similar strategy with the personal allowance.

What I have done is opened a separate credit card (MasterCard) that has a low limit of $500.

This is a high monthly allowance I understand, but for me its what I have allowed (but have never gone more than 50%) towards my dinners with friends/drinks/movies/toys etc

Not only am I able to keep my random joyous spending separate from the household related expenses, I also get points on all my transactions which equate towards free groceries at the end of the year (not a bad reward).

Also, all my spending can be tracked at the end of the year (from the statements that I keep) to see how much money I might have wasted on unnecessary things and better allow me to tweak my personal allowance for the following year.

This method has worked for the last few years and enabled me to maximize every dollar.

I know everyone has their own set spending limit and its tighter when there is a family and kids involved. But by having a record of what you spend your allowance on, you are able to see and think about how wise your actual expenses are.

Good point that you might otherwise not spend the $4800/year. I completely agree, however, we already have a problem with impulse buying and it has historically been higher than $400/month. This actually “forces” us to limit this spending and we might even challenge ourselves in the future by slowly lowering the amount from month to month. This also helps with differences in spending habits. I am a saver, while my husband is a spender. This way there are no arguments about justifying purchases.

The other benefit is we learn the habit of saving for things rather than charging to a credit card.

To others: I agree you don’t need to track it and it feels freeing. The only reason I track it because I forget on what I spent it on and it allows me to spend on planned purchases.

My husband and I definitely find the allowance system works for us (personal and joint debit cards) and helps to counteract our differences in spending (as mentioned by lots of other commentators here – our system is the same as #103 Emily).

Things like clothes are considered discretionary and hence come out of the allowance (occasionally annoying when I have to buy work outfits, and husband works from home and wears jeans). But on the whole it works well. That way, they can’t complain about how much you spent on shoes, and you can’t complain about that new piece of computer equipment.

I like carrying cash around for that exact reason. You still question your purchases but it makes you think twice about them because you can visually see your amount of money go down. Nothing wrong with spending money on yourself, You need to treat yourself every now and then and everyone has their vices of things they like. By setting your own allowance, it makes it easier.

I started a weekly cash allowance too this year.
I get cash Friday for allowance, gas and groceries. Balancing the checking account is much easier with fewer debits and withdrawals. Weekly works for me because I grocery shop weekly and keeps me honest.
My husband takes out a set amount once a month and that works for him. Some months I just transfer the cash to his savings account instead because he makes his cash last and last!

elena has a good point, which I found as well: it is easier to ‘see’ and track my larger purchases if I don’t have a bunch of smaller transactions muddying the water. I find if tracking expenses takes too long I will fall behind. I need a gross tracking system where I have a ballpark of regular expenses that I don’t have a ton of control over to verify my budget is still current, rather than a penny by penny accounting. The closest I can get to visually reconciling my spending to my budget the better it works.

Time is a really scarce resource in my life, so I follow an 80/20 philosophy. I will get 80% of the benefit of an exercise with 20% of the time investment of doing the whole job. A penny for penny accounting system would take 5x the time of what I spend on my budget now. I could squeeze more money out of my household, but the time it would take isn’t worth it at this time. We make enough to meet expenses and savings goals. If money were worth more than time I would rethink the balance.

Half of our transactions are: parking, lunch, movie rental, dinner, etc. These can easily bleed a household dry. The “allowance” system is the most time efficient way I have found to account for these expenditures within a household budget, especially since it’s relatively conflict free. Negotiate the number with your spouse up front and it’s done.

Gosh, I wish I had some money to give myself for an allowance. After business expense, grocery, mortgage, car, investments, I’m pretty much done. Our family fun time is once a year for a family vacation.

I really hate dealing with cash (remembering to get it, remembering to spend it, tracking it, etc), but I don’t have a hard time tracking it so long as I get a receipt.

My only issue here is for dances. I really like swing dancing, but I have yet to attend one in which they accept plastic, and they aren’t set up for receipt giving. I’ve found putting sticky notes in my wallet with the amount I’ve spent on it helpful. When I clean out my wallet, anything paper gets taken out and recorded.

All my (non-fixed expense) purchases go into one of three categories: food, gas, or miscellaneous. I hate dealing with 50 sub-categories and whether or not toilet paper is a household expense or a health and beauty expense, etc. So this system is perfect for me.

We are at the point of going to cash vs credit card. It has become to easy to pull the card out and not think about what we are spending. We are currently debt free but want to make employment changes and to do that we need to really tighten up on the Want or lifestyle spending

Following up on some of the posts, we track all our spending but it takes very little time because we can download our account statements from Wachovia directly into Quicken.

And while we track 99% of our spending we don’t always change our habits based on Quicken. Although some times we do, when your spending is broken down into pretty (or ugly depending on your perspective) pie charts you may decide that the eating out pie slice (or the lunch spot) is much too big as I can change the pie chart to show me categories or vendor names.

Finally, we like the allowance (although our system is really allownace plus variable expenses since we include groceries, gas, and other non discretionary expenses) system because it provides more equality in our house. Since one of us earns more the other thought that person should get to spend more. But the one who earns more didn’t really think that was fair because both parties work hard at work and at home.

My cash allowance is a line item in a monthly zero-based budget. I intentionally don’t track individual purchases from it systematically, unlike everything else. I tend to be a tightwad, but I find that having a small fixed amount of ‘unaccountable’ cash helps prevent me from crossing the line which separates ‘frugal’ from ‘cheap’. My allowance is a safety valve.

I do hang on to allowance receipts for a month or two and check them *if* I notice some Want spending has become regular, and I want to optimize it. For instance, I bought an annual membership to a repertory movie theater when I realized I’d recoup the cost and then save money in a short time.

I have a tendency to be a bit of a tightwad when I’m really focused on a goal and will stop spending money on things I really do want or need. So I have an allowance and one for eating out and clothing as well. Then I don’t need to feel guilty for spending on these because I’ve planned it.

As for tracking, if it’s cash, I usually don’t. It’s not worth the bother to me for the rare occasions that I do carry cash. I categorize all my bank transactions, so whenever I come across a want item, it goes to allowance, which I’ve split into things like books, craft supplies, etc just for curiosity’s sake. The other method I tried for a while was having a separate checking account that held my allowance money. After a while it just seemed superfluous though.

From Comment #117, “Since one of us earns more the other thought that person should get to spend more. But the one who earns more didnâ€™t really think that was fair because both parties work hard at work and at home.”

As “the one who earns more” in my relationship, I totally agree with this “one who earns more”. We both work hard and are successful at what we do, but one of us choose to be a teacher and one of us choose to be a software engineer. Do I really deserve more “allowance” as a percentage of total household income? Absolutely not. I see no reason to “punish” my husband for his choice of profession especially since teachers are an essential part of society!

My husband and I also have allowances. We each have a separate checking account (technically joint, but one is mine and one is his) and separate credit cards.

We transfer our allowance into our accounts at the beginning of the month, from our joint “bills” account (into which all of our income goes, and out of which all of our bills are paid). We can use debit cards, our personal credit cards, or withdraw cash from our own accounts (so there’s your answer to keeping track).

Oh, also… we each get $300 a month which seems like a LOT compared to other people, but I’ve asked to see some other people’s budgets and that’s where it’s different.

They budget for things like clothes, entertainment, and haircuts as needs… we use our allowance for that. (I cut my own hair, but he chooses to go to the barber.) If we go out to eat, we don’t have a “restaurant” budget, so one of us treats the other one using allowance money (we tend to take turns).

I used to be opposed to the allowance system. My husband and I stayed within our budget without really “trying to”…our natural behavior fit within what was in the budget and we were able to save according to our goals. Even when it was easy, I kept detailed track of our spending because I enjoy that kind of thing.

Then we moved 4 months ago and my income dropped by 70%. While I don’t mind diligently tracking a much tighter, less natural budget, my husband felt like he couldn’t spend a penny. Now, we each have a small allowance. It’s helped us a lot. We don’t feel like our lifestyle has changed, even though it really has. The allowance covers only individual wants. If we want something discretionary as a couple, it stays in the budget category like before. When I want some ice cream, it comes out of allowance. :)

The allowance didn’t become helpful for us until our wants didn’t fit easily into our budget.

I just went up and skimmed the other comments… about “rollover”, because ours are in personal bank accounts, it definitely “rolls over.” This is great because while we may be budgeting to save for something like a car (for when my car dies and/or when we have a baby, since all of our cars are 2-doors now), I may want to save for a large personal expense like a new DSLR, but my husband might not feel like our combined money should go to a “want” like that.

Or, I might not buy any clothes for months, but then summer comes and I realize all of my short sleeved shirts are ratty looking and I need to go on a wardrobe-enhancing spree… the money is there.

I pay virtually everything from my checking account and my checkbook register opens sideways to show my budget categories, which are also deducted with each check. (See the budgetmap.com if interested.) Each category is funded with a set amount each payday. I can’t bring myself to consider paying everything with credit or debit – those post entries always remind me of how young most of the readers here are. Just can’t give up my checkbook! Anyway, I do have a category for Misc, which gets $35 a month, though I sometimes swap money to it from other categories (like the $20 monthly clothes category). The point, though, is that over the month I stay within the amount I got paid. Basically, it’s a zero based budget. After I fully fund my emergency fund, I may increase my misc. budget – but maybe not. :D

My fiance and I will be entering marriage with a single income for a while, and to avoid the traps I’ve see others with single or unequal incomes fall into, we’re using an adult allowance concept. This money is for wants, not needs, just as your allowance is, with the additional caveat that it is for single or non-joint wants (joint wants are already accounted for in the budget).

I know a couple where the non-earning half has to do work on the family business to earn money, and this has bred a lot of resentment. Another couple each keeps a percentage of their check for personal fun money, and one half makes much more than the other, this also has bred resentment between them. So my fiance and I had a meeting to decide and hash out a proposed monthly budget and we split what is left over 50/50, because we are an equal partnership even when one of us earns less or none.

I should clarify that the monthly budget includes savings and savings come out of the checks immediately before any bills are paid.. of course, as I’m a faithful reader of your blog (though I rarely have a comment)! ;)

You don’t need to use cash to set up allowance. Just set up a checking account and transfer $200 to it per month, and use debit card to pay for anything.

Also, I don’t see the usefulness of separating “wants” from “needs” when it comes to budgeting. It is getting cool outside, is indoor heat a necessity? Probably you can set it to 45Â° F to prevent hypothermia, and the pipes from bursting. But if you indulge and set the heat to 75Â° F because you like it warm and toasty, how do you account for the cost differential between what you want and what you need? Similar analogies can be made for food, transportation, shelter, etc.

My wife and I give each other 40 bucks a month, which is not much when you are a gadget-lover like me. As I was reading your post, I thought, “Man, $200 a month. I don’t even know what I would do with that much money!” Well, in reality, I know exactly what I would do, the same thing with my $40/month: I would save it up for something that I wanted, like a new Mac Mini or a Flip Mino HD, or an SLR.

We call our adult allowance blow money because we can blow it on whatever we want, whenever we want. The whole point of that money for us is to not keep track of it. It is what we do to keep us focused on keeping track of every other penny.

To track your cash expenses check out xpenser.com and use the Dial2Do feature (free) or Jott ($) to use your cell phone for the voice transcription service to record every expense through out the day. Or you can text your data to the application. Xpenser can then be downloaded to Quicken, or Excel for budget tracking. I have used it for a year and track all expenses down to the cent. Not so hard as you think.

To keep track, have a simple voice recorder in your pocket (some cellphones and mp3-players have that option too) and each time you spend that money just say to it sth. like “10$ for a movie ‘….'”.

The thing is, in no time you’ll be saying to it also the elusive thoughts that pop in to your head every once in a while, but pop out just as fast if you don’t concentrate on them. Someone said that if we’d act on those genius thoughts we’d earn milions. Sth to consider.

I LOVE having a cash allowance system, I do find it quite liberating. It gracefully solves the one of the problems when we were trying to get a budget going — that I like to save up for larger purchases (tools, gadgets, electronics), while my wife is more into smaller purchases. So I’d feel that she was “wasting money” on hers, and she on mine. With the cash allowance, I can choose to save up for a big goal, or go out to lunch more, or grab a coffee if I want.

As for accounting for where it goes, once it’s taken out, it’s considered spent. And we can’t judge how the money was spent, either.

One way to track the ‘allowance’ is to collect the reciepts, or failing that keep a small notepad with you and jot things down.

The allowance is a great idea as long as you are firm with yourself about it. The minute you start thinking mid-month that you deserve another $50 you’re in trouble and you’ll need some self-restraint to keep things in line.

If some people still want to track this area of their spending then I suggest they use the notepad function on their phone. Just type in a little note when you buy something, then you can record it at the end of the day. If your phone has a record option leave a voice message.

I do this as well. In my budget I give myself $200 a month under ‘FUN MONEY.’ Then I put it in a labeled envelope and use it whenever I want something fun that I don’t need. It’s great. When I run out towards the end of the month, I think about what I want to spend it on next month and start hunting for deals.

Great blog by the way. I’ll be sure to start linking to you in my new blog.

I love reading the comments on this post too. It’s nice getting different ideas from people (esp since most of my friends and family don’t like talking about money…). I agree with Amber that both spouses should get similar amounts regardless of who is making more. Also it should not be combined with needs such as grocery shopping. A lot of SAHM I know have an “allowance” that is for household budget as well as wants. This is not really an allowance and makes people have to trade off between their wants and the family.

Well I talked to my husband about the allowance thing and we agreed it didn’t seem helpful at this point. The main thing is that we budget for the big things and let the rest take care of itself, and it works pretty well. I feel fortunate that although my husband and I do argue about certain things money doesn’t seem to be one of them.

I am totally opposite when it comes to cash. When I have cash in my wallet, I always end up buying things I had not planned to buy. If I withdrew $20 from the ATM today, it would be gone by the end of the day the next day.http://www.singleguymoney.com

How to track your cash expenses is easy. I use Quicken and whenever cash is pulled out I just “transfer” to the Cash Account in Quicken. I already save every single receipt (as does my husband) and so I enter the cash expenditures into the cash account. So it would start out with $200 for you at the first of the month and as you enter the receipts it would dwindle down to what’s left in your pocket. Some places don’t give receipts, so you’ll have to remember those few.

To SingleGuyMoney (#143): I used to completely agree. But the envelope system and labeling the cash makes all the difference in the world. If I have $20 unlabeled dollars in my wallet, it will be *poof* gone before I know it just as you say.

But if you put that same $20 in an envelope and label it for a specific purpose and know that it is your only money for that purpose until the next payday? I hang onto it pretty tightly!!

While I don’t have a monthly allowance, when I do pull cash out of the account (rarely) I do transfer it to a “cash” account in Quicken. Then if I remember to save the receipts or if I other wise remember to I’ll categorize it from there.

But I probably spend less than $2500 per year in cash, so even if ALL of it ends up in “misc” it is less than 5% of my total income. I consider that to be acceptable at this point in my life.

Not to mention that “allowance” or “freedom money” is a perfectly valid category ;)

We love the allowance! What we do in terms of our budget is to actually label it “allowance.” It’s a line item with a set amount every month. We love having money to spend that we don’t need to consult each other about and if we don’t find anything that month, we can save it for the next!

I just have a “blow” category in my budget that I fund each month. Although I only give myself $100 a month for that category. As for the cash thing, I mostly pull out $100 or $200 in cash and use it. But that money is normally for food items (lunches, food, misc) and stuff I normally would purchase. I’m not so concerned with tracking it all, as I have alloted a certain amount for each category in my budget. If I pull it out then I am aware of what the money needs to be spent on as it needs to last me until the next payday or month and I have an idea of how much I can spend each day to make it last.

Haven’t really described it well here, but it is a system that has worked for me since I have been budgeting. Maybe I’ll write a post on the subject as well and evaluate it a bit more.

The hubby and I get $20 a month each (well, not for the last couple of months because of some crises). I’m a big fan of the allowance system. It allows me to get some things I want for fun and that are just for me without feeling guilty for spending “our” money on what seem like “frivolous, selfish” things. And having that freedom prevents resentment. When my husband wants a video game he saves up his allowance and buys it with “his” money. When I want some supplies to try out a new craft I use “my” money. Neither of us has to feel like we’re going without something we want for what the other wants.

As for tracking cash spending:
We use cash for almost everything (except rent, insurance, etc. which are direct deposits). We use the envelope system. It saved our finances. We just track our spending on the outside of the envelopes for the different categories. Easy as pie.

Like Bill @150, I have a line item in the budget for “blow money”. Then I don’t have to track it – but it usually goes for special foods, lunch out, etc. Not extravagant, by any means, but enough to feel like I’m treating myself and/or don’t have to panic/scramble if I forget my lunch at home in the fridge.

My wife and I used to get equal amounts, but I discovered that I can get by and feel just as good with less, so I cut back and don’t miss it and don’t feel slighted. This is in line with a post from a month or so ago about ‘using less’ detergent, cocoa powder, etc. If you don’t miss it, it doesn’t hurt you! Like Jason notes @136, you MUST remove judgement from the choices a spouse/other makes with the allowance. That was hard for me at first. People magazine? Seriously? (To which she replies, ‘another chisel? seriously?’)

JD, when I get to the end of the month and still have some left, I’ll just decide to see how long I can go without pulling out the next month’s allowance. I’ll get later and later in the month, and I wind up skipping a couple months each year – thereby saving that money for a different purpose.

My wife and I give each other $75 a week to spend on ourselves. But the key is this isn’t just fun money or “blow” money. It covers anything we spend on ourselves, clothing, haircuts, personal entertainment, sports, coffee or lunches at work, etc. It just the right amount that you can save enough each week if you want to buy something bigger. That way we don’t have to negotiate or justify buying things for ourselves like an ipod or day at the spa, if you saved up for it then neither of us can feel any resentment. We’ve been doing it for 2 years now and it’s worked great.

I haven’t read the comments, I just wanted to contribute the methods I use.

a) get an actual envelope and cut off the top of it the the height of a dollar bill, then cut off the right side so it’s more like a sleeve.

Put the money in the sleeve. On the outside of the sleeve write the purpose of the cash inside (or don’t if you’re just using one sleeve).

Now you have 2 options:

Every time you make a purchase from the envelope, put the receipt in the envelope. If there is no receipt for the purchase, you can either write the amount of the purchase and the category of expense on the outside of the envelope, or take a slip of paper and make up your own receipt and put it in the envelope.

My receipts or “chits” that I make look like this “12/8/09 5.72 food out”.

Periodically (at least once a week) I empty the receipts out into a jar by my computer for later entry into my financial program.

(As an aside, this is how I track ALL of my spending–I record it first on a receipt, self-produced if necessary, put the receipts in the jar, then manually enter it into my financial program. I have found that this avoids “transaction drop” and gives me a better sense of my finances on an ongoing basis)

I don’t have tips as to how to use Quicken efficiently for this, because I found quicken to be so labor intensive that I switched to using my own spreadsheet, which is formatted so that I just have one sheet of transactions for the year and all I have to do is enter date, amount, account, category, and, if I want, a comment, which takes me like 5 seconds per entry. (another sheet in the workbook slices and dices according to spending category and time period and compares to my budget). But I’m sure others could give Quicken tips if that’s what you use.

I am paid every other week and I allocate $200 per paycheck as “allowance”. I pay the housekeeper $50 out of it since she comes every other week (and though I appreciate her services they are by no means a necessity LOL). Otherwise, I do not track this money. In Quicken, I have an expense labeled “Allowance” so that the ATM withdrawals are posted to that category. It allows me a little bit of freedom in an otherwise structured system.

I budget using a modified form of the 60% solution. 60% of my takehome pay is allocated to “committed expenses”, 10% to LT savings, 10% to ST savings and 10% to fun money. I only allocate 4% of takehome to retirement because I have 9% gross (pre-takehome) going into retirement as well (which is also matched by by my employer at 4.5%). This leaves me a 6% cushion (hence the “modified” form). This cushion actually physically stays in the checking account but in Quicken I usually sweep this to a “holding” account and use it as desired for larger things (like TV, Wii, etc) as well as built in overdraft protection.

Another thing I do is to make it a game to see how much of my allowance I can have leftover at the end of two weeks!

@ Tammy who wrote, “I donâ€™t track my allowance spending. Half the fun of having an allowance is spending it on whatever I want without having to worry about it.”

I always like to know what I spent my money on no matter what. That doesn’t mean I’m worrying about it however. Just because I wrote down what it was doesn’t mean I am worrying about it. It just means I get better info on what I actually do with my money, which I have found is extremely useful.

I also set aside a particular amount for discretionary income (the amount varies with my overall income), although I hadn’t really thought of it in terms of an ‘allowance’ before. Although I’m meticulous about keeping track of my spending within my general budget, I don’t track the individual purchases that I make with this money – for me personally that just feels a bit OTT.

I guess I do see it as ‘fun’ money, but I don’t feel compelled to fritter it away just for the sake of spending. I’m a bit clutter-phobic, and I don’t like buying ‘stuff’ that I don’t really want or need – so that rules out mindless impulse shopping. If I don’t spend it one week, I just put it aside & it mounts up until I do. So, as far as record keeping goes, I’m pretty relaxed when it comes to this money – I just categorise it as ‘misc expenses’ too, & am happy to leave it at that.

I too hate to carry cash, but for the times I do I have a “cash” account in Quicken called, appropriately enough, “Cash in Wallet”. Whenever I spend money it gets logged in just like credit card transactions, allowing me to code the expenses the same. It’s always easy to check whether it’s in balance just by looking in my wallet. If I have a discrepancy, I usually code it to food since that is where most of the cash is spent.

I use something very similar, by using some kind of credit/debit for everything that I need, and cash for wants. It works out well because the cash I have on hand I can afford to not save, and it helps me ‘ration’ that cash. Like if I didn’t spend any last week, it means I have twice as much to use this week on a nice date or something. I’m not usually a fan of the mental ‘trickery’ involved with saving, but this one really works well for me.

My Mom is “the original” penny pincher. She uses a credit card maybe twice a year and refers to it as her “AARP card.” She still does that old-fashioned thing of going to the bank and withdrawing money – has a hissie-fit over paying ATM fees to retreive her own money! :) Despite her seemingly old-school ways, you better believe she knows exactly where every penny of her cash went. She keeps a small 2×4″ spiral notebook in her wallet and when she takes out money, she records it. At the end of the month she tallies it all up and aside from knowing – to the penny — where her money went, she immediately starts complaining about how much they spent for groceries or how much they’re paying for gasoline. It’s old-fashioned, for sure, but a pocked-sized spiral notebook will allow you to make one combined “cash” entry to Money or Quicken at the end of the month. Your records will be complete and you’re montly reports will accurately reflect where every penny of your money went. Cheers!

My wife and I have been using the fun money or personal allowance concept for a few years since I read the “60% solution”. I think you can still find it on the MSN archives. Anyway, it allows us each to spend 10% of our after tax money any way we want to. We both work and have vastly different incomes, so it helps each of us feel that we get a direct return on how hard we work and helps avoid fights. In case you’re wondering, the other 90% gets broken down like so:
60% fixed expenses and necessities ( not an easy task and not always exact, but a good goal)
10% Long term savings (vacations, car down payments or payoffs, emergency fund)
10% short term savings (Special dinners out, holiday gifts)
10% retirement (currently a 401K with a 100% match on the first 4% and actually this is 10% pre-tax. The other amounts are determined by assuming that the after tax money is 90% of the total.)
We’ve been able to build up sizeable reserves using this method which we’ve used to help with the down payments of our last two houses. Granted, because of the down economy, we ended up buying more house than we typically would, but that just put us where the 60% is now more like 72% and we’ve adjusted our fun money down and are working on decreasing our spending overall to make up the rest.
My wife and I fully admit to spending more than we need to, but we also still live well within our means and have enough to put towards our future. Yes, our retirement fund got hit hard by the dips in the market, but we still continue to buy during the dips which has proven to be a good long term strategy. We’re still in our mid-thirties, so we figure we can ride this out. If the 401k matching were ever to change, we would adjust all of our other percentages accordingly.

My husband and I each taking some cash for ourselves actually saves us money and stress. We can each buy what we really want. I am VERY careful with my “personal” money, and I don’t part with it easily!

And we don’t keep track at all, I just write down “Cash – Amy” and then “Cash – Kevin”. I wouldn’t want to track my fun money, and I don’t care what my husband spends his on.

I accidentally started this practice about a year ago. And, do not track my cash. I find that I actually spend less because it is “my” money. I love having “my” money build up in my purse. I use it for lunch or whatever out. Even a jug of milk when that is all I need from the store. As it builds up, I find I want to share it more than my “real” money. As in donations. And, when it really builds up, I can get a nice new outfit and feel like I really got a reward.

I have a small spiral-bound notebook in my purse. If I spend cash and am nowhere near my laptop to input it into Quicken, I write down the date, the amount, and what it was spent on in the notebook.

It is no different than writing checking account entries in your checkbook register. Not a bit different. If you routinely write down your debit card transactions in your checkbook on a daily basis, just pretend cash transactions belong in a register too. If you have problems keeping up with your checkbook register, though (and you track your accounts through online banking or similar instead)… I dunno what to suggest.

Quicken lets me have a cash account. And with any other entity that holds my money but isn’t a bank account, such as PayPal, I set it up as a cash account but rename it.

Oh, and when I track my cash in Quicken, I don’t lump it into one big cash entry at the end of the month, as others here do. I treat it, again, exactly like a checking account. If I spend a buck twenty-five on the washing machine in my apartment building, I enter the transaction as a household laundry expense. If I buy soda in the laundry room, I enter it as a vending machine soda expense. (And beat myself up at the end of the month for paying ridiculous amounts for something that costs me maybe a third of the vending machine price at the grocery store!) It keeps me honest–I know where my money goes to the penny, AND I know what I am spending it on to have a better idea of where I might need to cut back.

Cash tracking is quite effective with mobile phone. I’m using this method for years. I have one SMS dedicated to put down all my cash payments with easy prefix (eg f10 – food $10). Lot of handys are supporting hot menu and you can place your SMS or memo there. Each week or so you can summarize your spendings.

This is EXACTLY what I do (and my husband will probably start doing the same) – the adult allowance is exactly what I need because I’m just about the worst impulse spender out there.

Basically, this is how it works for me. My husband and I have completely seperate banking, except for our one joint account. We both get paid fortnightly (alternate fortnights), and so each pay day a set amount goes ($600) goes to the joint account from each of us to cover rent, food, utilities, gas and other household expenses. Then I have $600 go to my savings account (in a seperate online-only account). Then $57.50 ($115 per month) is for transport costs to and from work (monthly ferry pass). This leaves $150 per fortnight for me as my allowance – which I withdraw in cash from an ATM on payday. Easy!

It basically works the same for my husband and his accounts, except he does it without thinking about it (much better with money than me!).

This is great! I have been wanting to do some variation on the envelopes system for a while, but I couldn’t deal with the idea of having large amounts of cash in my house or wallet. I also download transactions from my credit union’s website and upload them to You Need a Budget, so I avoided using cash because it’s harder to track. BUT, if I only give myself the cash that would go in “entertainment” anyway, then who cares?!! BRILLIANT. That is the category that I have the hardest time keeping within budget.

The plan for next paycheck (paid monthly) is to decide what I can afford for an allowance and chop that in quarters; that amount is how much I’ll get each week. If I don’t mete it out, I’ll spend it all at once. Have to decide what counts as “entertainment” first, though, I guess. I will still use my debit card for most or all other categories.

I think for certain personality types, an allowance free of tracking might be a bad idea, and a way to cheat, but for other types, it is enough freedom that you stop feeling resentful (and rebellious) about tracking every stupid penny. I get so frustrated typing things into YNAB that I fall off the wagon more than I’d like (also my computer keeps breaking, which doesn’t help). Neurotically tracking every penny isn’t helpful for people who are neurotic already. That said, I want to make sure I don’t spend all of my entertainment money on Vanilla Coke and bean burritos, so I am going to have to be very specific about what the cash is for.

I want to move closer and closer to remarkable frugality, so I want my expenses to get lower and lower, but if I do decide that I can afford $200 a month for burritos, yarn, novelty socks and styling products, then it is a question of priorities and not penny-tracking.

PS: In YNAB, you can set up a ton of different accounts of various types, including cash, but I’ve tried that and it doesn’t work for me and my lifestyle. It’s another level of complication. But the YNAB program is totally competent in the cash department :)

I do a bit of the combination of cash and card. I opened a second checking account at my same brick and mortar bank (though big savings is at ING). Every month, I transfer the whole allowance to the checking account. I leave some on the card for gas, and I take the rest in cash. I can log on to check if I need to, or a look at my cash and see where I am for the month. Also, for cash tracking, I just round up to the next whole dollar and figure it’s a painless way to save a little extra over time.

Both my income and my wife’s go into my ING account, and I track every expense to the penny electronically (using both Yodlee and HandyFinance on my PDA) but my wife has been complaining how she doesn’t like having to “justify” everything she buys to me. We put everything on rewards credit cards and I pay them in full the day the statement cuts. She has a separate bank account, but never has any money in it.

I think that starting in January, every time I get paid (every two weeks), I’m going to withdraw $25 and give it to her in cash for her to spend as she pleases without me being able to track it. I don’t WANT to have to track it. I’ll just show a withdrawal to Joint Expenses; i.e., its money that’s already been spent. I’ll actually start next week when I get paid, but I’ll give her a double portion up front the first Friday in January.

This will only be for expenses she doesn’t want me to track. I think $50 a month will be plenty, as all gas, food, clothes, and nearly everything else will be put on a credit card and be paid out of our joint account. Basically, she’ll only need it for makeup, coffee, eating out with friends (if she doesn’t want to use the credit card), and presents for me.

I’m amazed to read that other people use what I thought was my weird system of a fixed amount that covers groceries, eating out, and impulse buys. It works for me because I like to eat out once or twice a week, but if I want that new book, or a pedicure, I need to stick to eating in, or some such variation.

Once I found myself with enough cash left at the end of the month to pay for my car maintenance, which I usually charge. It was nice to pay cash!

Be careful including groceries in this category. I have found that it’s better to make a firm groceries budget/envelope that is separate from my “allowance” envelope, so that I am sure I can feed myself for the month without going over budget.

See, if I include eating out in with my grocery money, what happens if I eat out 5 times instead of 2 out of the cash envelope, then don’t have cash left to buy enough groceries?? That has happened to me before and blown my monthly budget out.

So I make the “allowance” be only *unnecessary* expenses, which to me would include eating out, books, movies, and stuff like that. When that money is spent, I know it is spent so no more movies, books, or eating out or whatever. But I still have money left over for groceries because that’s a separate envelope or category that is sacrosanct.

This way I am not tempted as easily to dip into savings or use credit card debt to cover the holes in my planning. After all, all I really need in most cases is food until the end of the month. It’s easy to stop spending on the other stuff, the trick is knowing *when* to stop. Which is what the envelope system/adult allowance is set up to tell me.

We each get the equivalent of $12 USD a month (it’s what we can afford, and we always have plenty leftover; cost of most things is quite low here in China).

We spend it on anything that’s either wants or that’s mostly in the category of “me only”: books, dvds, crafts, non-meal snacks, and little extras like hair bands, notebooks, pens, and other small random expenses that only one of us will use. We also use it for all our clothing (this is partly because for me, clothing sometimes overlaps with crafting). We also save it to spend on valentine’s and anniversary gifts, the only two types that aren’t included in our budgeted “gifts” category. We have money budgeted separately for dates, so eating out isn’t “personal allowance” money.

This system works great for us. One, it’s easy to surprise the other person. Two, I sort of “microbudget” my allowance. My husband handles the overall family budget, so I divide my monthly allowance into to what I want to save for the next gift occasion, what’s for clothes, how much I can spend on crafting (this probably keeps me from going overboard in that realm!!), etc. Three, I realize the value of my kuai (Chinese unit of money) and so I don’t impulse shop.

People have been asking how someone can hange their mindset, and prevent themselves from just returning to the ATM to withraw more allowance. I would say for starters – break it into smaller portions. Go on a weekly basis, or possibly even a daily basis. Its a lot easier to hold off spending for 24 hours, or a couple of days, instead of looking at a long dreary month ahead without any fun money. It will also reinforce the idea of not spending every available cent. If it is broken up into sch small portions that it seems like a meager daily amount, then you will be more likely to conserve it until tomorrow.
It also helps to plan ahead. If you know you want to buy a DVD that is coming out in two weeks, put that money aside. If you want to be able to go see a movie in the theatres on the last week of the month – put that money aside. Assigning it to specific activities will help because then if you sped it, you know you are giving up movie night.

I also find it strange to include food in this category ( even eating out), but whatever works. Everyone is going to have a different idea of how they would categorize their own expenditures and what their individual wants and needs are.

We changed our system about 4 months ago – we use cash for our family eating out money & for our own personal allowance or “blow money” as we call it. I have separate sections in my wallet, and I have our family food cash in one along with a piece of paper where I jot down ‘Applebees $20 12/13’ etc. We found that by writing down each restaurant and how much we spent, it really helped us pay attention to whether or not a restaurant was worth the $$…we had burgers and chick strips @ Red Robin a few months ago, and it cost us $33 for 2 people…way not worth the level of food, and we won’t be going back. It really helps us stick within our food budget, and so far, after tracking our food this way for 4 months, we’ve yet to bust our budget.

On the individual side, we’ve always had blow money, but we’ve then struggled with how to handle our individual eating out. I’m a SAH/WAHM and my husband is out and about a lot (we own our own business). He eats out lunches a good bit out of necessity, and I found myself “planning” errands to coincide with lunchtime so I could eat out too, bc I didn’t want to be “left out”.

Starting with this new system, we bumped up our blow money from $50 to $100/mo and that now includes our hobbies as well as any individual eating out that we do. Now, I find myself specifically planning so that I can eat at home so that I don’t have to spend my “own” money, and have accumulated a tidy little savings pile (I’m a stasher) over these months. He continues to be out and about a good bit, and ends up using at least some of his towards food.

When I do end up being out, I’m much more diligent with what I eat, and am better at using coupons to reduce the cost, rather than getting 1 sand plate @ Zaxby’s with a drink for $8, something I never thought twice about before. I have been lax so far, but intend to keep another slip of paper in my wallet to jot down where my blow money goes so that I can also look back at the end of the month and better evaluate my decisions…great post!

this is not a criticism of your spending practices, but since you mentioned a couple times having to eat out because you were our of the house, I just wanted to make the point that just because you are out, doesn’t mean you have to *eat out*–at least not very time.

It certainly is convenient to eat out, which is why I used to do it a lot, but I realized that the money would be more useful to me used for other things.

So over the course of the last, say, year and a half, I have gradually shifted to eating all of my own food that I make at home. If I am going out, I throw a lunch together (maybe some hot stew in a vacuum container, some fruit, and a small thermos of coffee in the winter) in a canvas bag and take it with me.

It may be worth it to you to eat out, but I think it’s important to realize that you do have the option to not eat out and just eat food that you packed. Kind of like a picnic.

One thing about your post that I also found interesting is the part about how once you and your husband granted each other a a budget for “blow money” that included food, you started to not eat out so you could save the cash for other things! It’s interesting how when we have control over our budget amounts, we start to make different value decisions for the spending, seeing a personal benefit from not spending the money because we can “save it up” for our later use. Whereas if it the money is from a common pool, there is a tendency to use the money up because if you don’t you won’t be able to use it later, because some other party might use the money. I see this in business contexts, too–some of my business clients are nonprofits or local governmental agencies that have yearly budgets. Since they don’t get to keep money from one year’s budget and save it for use in the next year, I get orders for supplies and books and such from them at the end of the year, with the proviso: “this purchase has to be dated before X date”. If they had the ability to hold onto their money without losing a corresponding amount in their budget the following year, they probably wouldn’t buy those supplies, at least on that schedule.

My late husband and I used the allowance system too. It was a budget and relationship saver! (He was the spender, I was the saver). Now that there is just me, I just have a line item in the budget for “personal spending”.

I withdraw cash three times a month (1, 10, 20th). The cash is casually tracked (to the next highest dollar) on a slip of paper in my wallet and the change gets dumped into the change jar.

I used to use my overtime pay for the personal spending without guilt category, but am on salary now, so have switched systems. I’ve also streamlined the number of savings and checking accounts I have open to take advantage of the new high yield checking account (5.25% !!!) at the work credit union.

I pretty much try to track it to the penny; I have a couple of methods I’ve tried. One is the spreadsheet I downloaded from Crazy Aunt Purl; the other is a very simple table that I keep handy in Word. I have one column for dates, and five columns across: Food, Doctor, Fabric/Yarn, Other, Clothes. It might not work for everyone, but it works for me. I itemize everything that goes into each column – what I bought, how much. Anything that’s taken out of my paycheck, I don’t track – I treat it as money I never had (transportation, gym fee). Yep, my mortgage and other household expenses are Other (although it might make me feel more adult to call it Mortgage/Other). There aren’t a lot of columns, because there isn’t much to divide – my recurring household expenses (“Other”) take most of it. But it does let me track when I’m spending too much money at the used bookstore. This year I expect to see even less divided – my goal is to knock out my credit card debt completely next year, which may make for some creative dressing. And eating. However, it’s what I really really REALLY want to accomplish, and I get a perverse pleasure out of seeing my credit line offers go UP as my balance goes DOWN.

My husband and I have had allowances since day one in our marriage. We had tons of cc debt to pay off, so I was a little worried, but we’d been advised that tightening the belt too much and never having any money for anything but needs could create tension in our marriage. After three years of having $200 per month per person, and constantly each of us blowing through it before the month was over, we switched to a weekly allowance. And it’s worked like a charm! Now, if I run out of my money, I know it’s only a few more days until I will have some more. At the same time, we have paid down nearly 20K of cc debt and paid off and sold a car that we were upside down on the loan on. We went down to one car for going on a year and a half now, and for us that was a much easier sacrifice than our spending money, which could have easily covered a car payment. Yes, we could have paid down 4800 per year more of debt, but that’s if I had made it that long. Knowing that I can spend this money however I want, guilt free, has made our marriage work so much better. We never fight over money now, have a wonderful working budget (we use emvelopes/finicity) and because of in impending inheritance, we will be paying off the remaining 17K of cc debt next month. What will we do with the $1500/month we’d been putting toward debts? Max out our 401Ks, create a new envelope for new baby expenses, and start working on our 6 month emergency fund. It will feel so good, and the adult allowance was such a key part of getting this far!

I know that I’m late to this discussion, but I thought I would still add my two cents.

My husband sells collectors’ items on ebay. (He also purchases them). I have always considered the ebay money “his” money, though he sometimes uses it to help pay for joint items or to help with vacation expenses. He got a paypal debit card which is linked to his paypal checking account (which pays interest, by the way).

I have spending issues, and I noticed how he would use his paypal card for dinners for us and special treats for himself, and wished I had that. So we added an Electic Orange checking account (with debit card) to our numerous INGdirect savings accounts, set up a monthly transfer, and viola! I had an allowance. I just started the allowance in October, and already I am much more conscious of my spending, I don’t feel guilty about my spending, and I’m spending less.

My husband and I have one checking account for bills and one for “petty cash.” The bills account does not have checks, nor does it have a debit card (well, it does but we didn’t activate them). The petty cash has a debit card, and we use that for meals out, haircuts, clothes, etc… (what you call “wants”). A set amount goes in each week, and when it’s gone, it’s gone. Normally we have money left over at the end of the month, and I transfer it to savings.

The cash allowance idea is good for limiting unnecessary spending, and I add another aspect: making an allowance (this time, an amount I am trying to spend) for things that I buy that can improve my financial position. Like computer training, information about fundraising for businesses, and such things. This is money you *try* to spend.
After getting used to limiting unnecessary expenses, I am realizing that it is important also to get used to expending some resources to get future returns as well–spending money to enable networking, knowledge transfer, gain skills, or in general discern and pursue financial and personal opportunities.

So I have shifted $50 of my discretionary spending to a “spending to save ” category I learned this idea from RAmit at “iwillteachyoutoberich.com” and it makes sense to me.

Since we are a one-income family (and want to stay that way, since my working would add very little $$—and more spending on clothes/gas/food–to the mix, not to mention stress) we have to count every penny. When hubby gets paid, we automatically take $200 out in CASH and put it in an evelope. That is our discretionary income for the next two weeks, since he gets paid only two times a month. From this, we pay for everything that we may want or need (all our required bills are paid online)

It is an amazing thing when you actually have to PAY CASH for something, actually hand the money over. It makes all the difference in the world. We live in a small town with lousy shopping, but if I am not careful, I can fritter away my money on uneccesary items. So I have to shop online by using the dreaded CC. But when I purchase something online, I take the $$ out of the CASH envelope and place it in the “Monthy CC payment” envelope (we pay off the CC every month and DO NOT carry a balance). We try to keep it at $500 a month. this includes books from Amazon that we just can’t live without, CDs, clothes for me, etc. Since I have to buy 99% of these online, it makes me very conscious of how much I am spending and what I am buying and if I am getting the biggest bang for my buck. Needless to say, I don’t buy too much, but then I don’t need too much. We are in the processing of remodeling our home and have given so much away; it took me months to clean out those rooms, and I figure I wasted about 1.5 years of my life force managing “stuff”, as well as wasting my hubby’s precious lifeforce (his paycheck is paid for in blood, lol, believe me) and I felt ashamed of myself for not being conscious of this. So now I am conscious of every penny, and so is he. Dialogue and communication is key if your budget is a joint one.

As for writing things down, you must write then down IMMEDIATELY and not fall behind, because then it seems hopeless and you will give up.

Started out with $20 a month and have almost made it through a year (NOT easy!). Helps that together with a very frugal spouse, every other necessary expense is worked into the monthly cash flow. (Including monthly savings allotments for Christmas gifts, birthdays, vacations, etc.)
When it comes time for the annual salary bump, it might be time to increase.

As far as logging this $$, I wouldn’t worry too much about it. Dave Ramsey calls this wiggle room the “grease” that keeps the gears of the remainder of the budget turning smoothly.

Hello All, first time at the site as I followed link from the YNAB site.

When I setup our budget (first budget in a dozen years), this was something that just made sense to put into the entire process. We each receive $100 for the month, but it arrives in various amounts as the 3 checks a month vary.

Another factor that has greatly contributed to successful budgeting is the program YNAB. Its sole purpose is to help you keep a budget and it does it incredibly well. I have all but switched from Quicken to YNAB as it keeps what is an electronic version of an envelope budget but with greater ease and more power.

Now that we are on a budget life is so much better and to know where every dollar goes, keeps one mindful and practical.

This works well for me. I give myself $40 per biweekly paycheck and generally use it for lunch at work, the odd parking fee (say a Dr visit), and such, lunch with a friend or a movie. Turns out I spend it slowly as I no longer shop for “fun”, only if I need something. Besides, job is so busy I have no time. I just track it as a $40 “spending money” item on my budget. The $40 usually lasts the full 2 weeks and frankly I feel rich compared to when I never carried cash and charged everything. It is my spend cash fix….

“I find it easier to track my spending when I use credit or debit cards.”

Well, I do too, because it leaves a perfect record of what I overspent on. But wouldn’t you rather use the cash envelope system and have *more cash* at the end of the month, even if that means having fewer or less-granular records?
I’ll take the less detailed record keeping of using a cash envelope system in certain categories, because the great benefit of the cash envelope system is knowing something that is a lot more important: I stayed within my budget again this month!

A budget is a strategy. The cash envelope is a tactic, and is arguably more important on a day-to-day basis.

Keep in mind that the main need need to track expenses for either a business or an individual is due to the need to determine profitability or for tax compliance. That info is then used to help determine changes in the business (or personal) budget that will increase profitability (or savings). But after the budget is determined, what matters is “execution”-making the budget stick. And that is done at the point of sale or the cash register, not at home in your office. It’s my actual spending behavior in the field that determines the success of my predetermined budget plan. And the cash envelope system is my top, #1 tool for keeping my budget execution in line with my budget planning.

I believe that, since using cash envelopes *by definition* keeps my budget in line better even than tracking my expenses, there is no need to track that cash other than saying “$300 for food in March 2010” or whatever. I have already met my goal, which is a) to buy the stuff I need and b) do it while staying within a set amount of money for the period.

However, if you think there may be some value in sub-tracking your envelopes, just write the expense down on the outside of the envelope as you spend the money. I find that the psychology of spending a set amount of cash in an envelope takes care of all the concerns that expense tracking would usually address, and does it beforehand and at the point of purchase, where it really matters most, instead of after the fact.

It is perhaps telling that I only use the cash envelope system in categories I know I tend to overspend in/break the budget in: food, entertainment, and (to a lesser degree) clothing. That’s because I know that those cash envelopes do and WILL keep my spending in line.

Keep in mind that budget execution is much harder than budget planning, because budget execution is behavioral, is ongoing and is done throughout the month, and requires psychological habits and tactics, while planning is mainly intellectual (moving numbers on a spreadsheet). The best tactic I have ever found for spot-on budget execution is the cash envelope.

We use what is essentially a pre-paid credit card. It still tracks like using a card, but you only put in a certain amount of money each month and you can’t go over. And if you underspend for the month, it just stays in there. The one I use cost $4 for the very first deposit, and thereafter it is free. And you can build up to $6,000.

All household bills including the mortgage, utilities, credit cards, car gasoline, etc. are paid outside of the budgets above.
With that said, my wife believes her amount is not sufficient, even though that amount is solely for her. She does not have to use her money on “anything” except herself. She also believes the budget for food/goods is not sufficient. The food budget which includes 3 days of cooking, 2 days of eating left overs, and 2 days of eating out. I love her dearly, but she has a spending problem. I’m trying to teach her how to budget. She wants me to increase her budget. I just can’t imagine why any middle class “individual” would need more than $500 ($125 x 4) of play money every month. I could be wrong. What do you all think?

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My name is J.D. Roth. I started Get Rich Slowly in 2006 to document my personal journey as I dug out of debt. Then I shared while I learned to save and invest. Twelve years later, I've managed to reach early retirement! I'm here to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you get rich slowly. Read more.

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